Kai Ryssdal: Back in the salad days of the housing boom, a home was as good as a cash machine. People taking equity out to pay for lavish renovations and flat screen TVs.

But a study out this week says a lot of low- and middle-income families did something else with the money. They sent their kids to better colleges than they could otherwise afford.

From the Marketplace Education Desk at WYPR in Baltimore, Amy Scott reports.

Amy Scott: Take a kid who was 12 years old in 1997. By the time she was ready to start college, the family home would have appreciated by more than $72,000 on average, and banks were practically giving away second mortgages and home equity loans.

Michael Lovenheim: The idea is that when this equity became easier to tap, families were extracting that equity to help cover the cost of these schools that were more selective and more prestigious, but also higher cost.

Michael Lovenheim is an assistant professor at Cornell University and co-author of the study published by the National Bureau of Economic Research this week. He says for every $10,000 jump in home prices, students were more likely to attend flagship public universities and less likely to go to community college. And he says choosing a more selective college pays off.

Lovenheim: Those students tend to graduate quicker, they’re more likely to graduate, and they have significantly higher earnings.

It’s easy to guess what’s happened since the recession and collapse of the housing market. In 2004, Dean Nimmer took out a home equity loan to help send his son to the University of Massachusetts at Amherst. Since then, his home value has falled by half.

Dean Nimmer: I think for many, many people the notion your home being a way to leverage paying for really important expenses and actually moving up is pretty much gone.

Nimmer says he still would have sent his son to UMass. But he may have had to take out expensive private student loans.